Plan Would Be Improvement for Many in Southland

President Clinton’s proposal to cover prescription drugs sounds good but how does it measure up to what the elderly now can buy on the open market?

The answer is that for retirees in Southern California who buy prescription drug plans through a supplemental insurance policy, the president’s plan would cost less. When fully in place in 2010, it also would offer more insurance coverage for prescription drugs than is available in all but one of today’s private plans.

There are two categories of retirees who may get a better deal now than they would under Clinton’s plan. The first consists of people who get their supplemental health insurance through their former employers.

Nationwide about 20% of retirees buy health insurance this way and some of those plans cost them less and are more generous than Clinton’s.

The second category is retirees who get their prescription drug coverage by enrolling in managed-care organizations, such as PacifiCare or Kaiser, which cover prescription drugs.

Roughly 15% of the elderly nationwide--and a higher percentage in California--are in managed care. However, not all managed-care plans include drug coverage and these plans increasingly are saying that they cannot afford to continue covering expensive prescription drugs.

Apart from those two groups, most retirees get prescription drug coverage from “Medi-gap” insurance plans--so called because they cover the gap between the services that Medicare covers and those that retirees actually need.

Insurers nationwide offer 10 Medi-gap plans, only three of which provide prescription drug coverage. The others cover such costs as the $192-a-day co-payment for hospital stays of more than two months and the 20% co-payment for office visits to doctors.

Most plans also cover the $768 deductible that patients must pay for hospital stays before Medicare’s coverage starts.

The plans are offered nationwide but the prices differ depending on the region in which retirees live.

Additionally, nearly every plan sets its premiums based on the health of the insured retiree. Someone who is sick and likely to use a lot of medication probably will have to pay a higher premium than someone who is healthier. The amounts used here for estimating Medi-gap charges are illustrative but actual charges depend on a patient’s health.

Under Clinton’s plan, for example, a 65-year-old man with an annual income of $12,000 initially would pay $24 a month ($288 a year) for a drug benefit of up to $1,000 a year.

However, he would pay half of the price of each prescription. His prescriptions thus would have to reach a cost of $2,000 before he received the maximum benefit. For this retiree, $2,000 worth of prescription drugs would cost $1,288, the sum of $1,000 for the medications and $288 for the monthly premiums.

Medi-gap plans typically carry much higher monthly premiums but they uniformly cover more services than prescription drugs, according to Weiss Ratings, a health-care consultant in Palm Beach Gardens, Fla. That makes comparative cost calculations all but impossible.

Under the current Medi-gap insurance plan offered in metropolitan Los Angeles by Blue Shield of California, for example, a 65-year-old retiree would pay $160 a month ($1,920 a year) for a policy that would pay up to $1,250 a year for prescription drugs. Weiss estimated that $89 a month ($1,068 a year) goes toward drug coverage.

The 65-year-old retiree would pay the first $250 in drug costs each year and then half of the cost of each prescription. So for $2,000 worth of drugs, the retiree would pay $3,045--the combination of the $1,920 annual premium, the first $250 of drug costs and $875 of the remaining drug costs.

The annual premium, however, would buy the retiree other benefits.

Many other private insurers surveyed by Weiss in the Los Angeles area charge more for the same plan. The American Assn. of Retired Persons charges slightly less.